South African Finance Minister Pravin Gordhan delivered his first budget speech yesterday. It is no wonder that the man who turned the South African Revenue Services (SARS) around commanded significantly more praise than the lack-lustre efforts of President Jacob Zuma in his State of the Nation address a week ago.
Mr Gordhan’s focus is clearly on establishing credible monetary policy and reducing unemployment. While it could quite easily be argued that the economic stability during Trevor Manuel’s tenure is more a result of pure luck than of any amazing policy decisions, Mr Gordhan will not be so fortunate. He is taking the helm at a time of real economic crisis both locally and internationally. Solid, educated decisions will need to be made to mitigate the impacts on all South Africans and Mr Gordhan has given every indication that he is the man to do just that.
Education was accurately reflected through the budget as being a top priority for government. Total spend in the area has increased to R165Bn out of a total of R906Bn (just over 18% of the budget).
The focus on job creation also came through with a number of initiatives being tabled for encouraging employers to take on youth, particularly those without significant work experience.
South African consumers are likely to feel the pinch with increased sin tax (on the likes of cigarettes, alcohol and potentially gambling). Anti-smoking activist groups were complaining that the increase in cigarette taxes were not enough – in Europe, almost 80% of the cost of a pack of smokes is tax. Consumers will also not be happy with the sizeable increase in fuel tax (25.5c per litre from 7 April 2010).
All in all though, the budget is structured to benefit the lower income groups. Wonkie believes there is still plenty more room to tax the new South African rich class that have benefited from Black Economic Empowerment (BEE) programmes. Given BEE in its current form is largely an additional tax on South African society, the government would just be taking back some income which was rightfully theirs in the first place. Wonkie would certainly feel more comfortable with Mr Gordhan redistributing the wealth to those groups in South Africa that really need it.
For those of you who are interested, you can find the full text of the 2010 Budget speech here.
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